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A Cluster Analysis on the Default Determinants in the European Banking Sector

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Business Information Systems Workshops (BIS 2015)

Part of the book series: Lecture Notes in Business Information Processing ((LNBIP,volume 228))

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Abstract

The aim of this paper is to identify the relationship between banks’ probability of default and their risk taking incentives. Exploring a large set of bank level financial data from 203 European banks during 2005–2013 we apply the cluster analysis. The results indicate a number of two very different groups inside the dataset within each year, either using the hierarchical trees or the k-means clustering algorithms. Also, the composition of the clusters remains unchanged during crisis years compared with the pre-crisis for the vast majority of the instances. Finally, when mapping the clusters to the distance to default computed through the z-score variable, we show that banks with large size and high liquidity risk enhance their default risk.

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Acknowledgments

This work was co financed from the European Social Fund through Sectoral Operational Program Human Resources Development 2007–2013, project number POSDRU/159/1.5/S/134197 and POSDRU/159/1.5/S/142115 “Performance and excellence in doctoral and postdoctoral research in Romanian economics science domain” and from UEFISCDI under project JustASR - PN-II-PT-PCCA-2013-4-1644.

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Authors and Affiliations

  1. Faculty of Economics and Business Administration, Babeş-Bolyai University, Theodor Mihali 58-60, 400591, Cluj-Napoca, Romania

    Darie Moldovan & Simona Mutu

Authors
  1. Darie Moldovan
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  2. Simona Mutu
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Correspondence to Darie Moldovan .

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Editors and Affiliations

  1. Poznań University of Economics and Business, Poznań, Poland

    Witold Abramowicz

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Moldovan, D., Mutu, S. (2015). A Cluster Analysis on the Default Determinants in the European Banking Sector. In: Abramowicz, W. (eds) Business Information Systems Workshops. BIS 2015. Lecture Notes in Business Information Processing, vol 228. Springer, Cham. https://doi.org/10.1007/978-3-319-26762-3_7

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  • DOI: https://doi.org/10.1007/978-3-319-26762-3_7

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-26761-6

  • Online ISBN: 978-3-319-26762-3

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